U.S. trade deficit takes dip; figure is lowest since 2010

Elaine Thompson / Associated Press
Ships such as this one moored in the Strait of Georgia near Bellingham, Wash., transport goods imported and exported by the United States.

WASHINGTON — America's current account trade deficit narrowed in the July-September quarter to the smallest level since late 2010.

The deficit fell to $107.5 billion in the third quarter, down 9 percent from the second-quarter imbalance of $118.1 billion, the Commerce Department reported Tuesday.

Paul Ashworth, chief economist at Capital Economics, said most of the improvement reflected a decline in America's foreign oil bill.

He predicted that the deficit will remain close to 3 percent of the total economy or slightly below through all of next year.

The deficit in the monthly trade report, a separate gauge that tracks only merchandise and services and excludes energy, increased in October as U.S. exports fell by a larger margin than imports, a development that was seen as a sign that slower global growth was beginning to weigh on the U.S. economy.

Many economists predict the deficit will widen in coming quarters, in part because a global slowdown is dampening demand for American exports at a time when much of Europe is in a recession.

Other major export markets, including China, India and Brazil, have also experienced slower growth.

The U.S. economy grew at an annual rate of 2.7 percent in the July-September quarter, but many economists say growth has slowed to less than 2 percent in the current quarter as cautious consumers and executives reduce spending and investments because of the uncertainty over what Congress will do about the looming "fiscal cliff."

The current account is the broadest measure of trade. It tracks the sale of merchandise and services between nations as well as investment flows.

Economists watch the current account as a sign of how much the United States needs to borrow from foreigners.